| DEBT | NOTE 10 —DEBT: The Company is party to a number of sale and leaseback transactions. The Company’s obligations under these transactions are secured by, among other things, assignments of earnings and insurances and stock pledges and account charges in respect of the subject vessels. The arrangements also contain customary events of default, including cross-default provisions as well as subjective acceleration clauses under which the lessor could cancel the lease in the event of a material adverse change in the Company’s business. For each arrangement, the Company evaluated whether, in substance, these transactions are leases or merely a form of financing. As a result of this evaluation, we concluded that each agreement was a form of financing on the basis that each transaction was a sale and leaseback transaction that did not meet the criteria for a sale under ASC 842 and ASC 606 due to the fixed price seller repurchase options and/or mandatory seller repurchase obligations terms included in the arrangements. Accordingly, the cash received in the transactions has been accounted for as a liability, and such arrangements have been recorded at amortized cost using the effective interest method, with the corresponding vessels remaining on the consolidated balance sheet at cost, less accumulated depreciation. The balances in the following table reflect the amounts due under the Company’s secured debt facilities and secured lease financing arrangements, net of any unamortized deferred financing fees or discounts/premiums: (Dollars in thousands) December 31, 2023 December 31, 2022 $750 Million Facility Term Loan, due 2027, net of unamortized deferred finance costs of $3,124 and $6,400 $ 110,474 $ 487,164 ING Credit Facility, due 2026, net of unamortized deferred finance costs of $295 and $416 20,538 22,501 Ocean Yield Lease Financing, due 2031, net of unamortized deferred finance costs of $2,656 and $3,198 309,250 337,908 BoComm Lease Financing, due 2030, net of unamortized deferred finance costs of $4,166 and $917 229,583 71,140 Toshin Lease Financing, due 2031, net of unamortized deferred finance costs of $302 and $370 13,903 15,215 COSCO Lease Financing, due 2028, net of unamortized deferred finance costs of $ - and $1,187 — 46,544 Hyuga Lease Financing, due 2031, net of unamortized deferred finance costs of $265 and $323 13,786 15,093 Kaiyo Lease Financing, due 2030, net of unamortized deferred finance costs of $227 and $285 12,518 13,884 Kaisha Lease Financing, due 2030, net of unamortized deferred finance costs of $238 and $298 12,624 13,983 722,676 1,023,432 Less current portion (127,447) (162,854) Long-term portion $ 595,229 $ 860,578 Capitalized terms used hereafter have the meaning given in these consolidated financial statements or in the respective transaction documents referred to below, including subsequent amendments thereto. $750 Million Credit Facility On May 20, 2022, International Seaways Operating Corporation (“ISOC”), the borrower, and certain of their subsidiaries entered into a credit agreement comprising $750 million of secured debt facilities (the “$750 Million Credit Facility”) with Nordea Bank Abp, New York Branch (“Nordea”), Crédit Agricole Corporate & Investment Bank (“CA-CIB”), BNP Paribas, DNB Markets Inc. and Skandinaviska Enskilda Banken AB (PUBL) (or their respective affiliates), as mandated lead arrangers and bookrunners; Danish Ship Finance A/S and ING Bank N.V., London Branch (or their respective affiliates), as mandated lead arrangers; and National Australia Bank Limited, as co-arranger. Nordea is acting as administrative agent, collateral agent and security trustee under the credit agreement, and CA-CIB is acting as sustainability coordinator. The $750 Million Credit Facility consists of (i) a five-year senior secured term loan facility in an aggregate principal amount of $530 million (the “$750 Million Facility Term Loan”), and (ii) a five-year revolving credit facility in an aggregate principal amount of $220 million (the “$750 Million Facility Revolving Loan”) that amortizes or reduces in 19 quarterly installments, beginning on November 20, 2022. The $750 Million Credit Facility was secured by (i) a first lien on 55 of the Company’s vessels at the time of the closing of the facility, along with their earnings and insurances, and (ii) liens on certain additional assets of ISOC. The maturity date of the $750 Million Credit Facility is May 20, 2027, and is subject to acceleration upon the occurrence of certain events (as described in the credit agreement). The $750 Million Facility Term Loan contains an uncommitted accordion feature whereby, for a period of up to 24 months following the closing date, the amount of the loan thereunder may be increased up to an additional incremental $250 million (in increments of at least $10 million) for the acquisition of Additional Vessels, subject to certain conditions. On May 24, 2022, the available amount of $530 million under the $750 Million Facility Term Loan was drawn in full, and $70 million of the $220 million available under the $750 Million Facility Revolving Loan was also drawn. The loan proceeds, together with available cash, were used to repay (i) the $163 million outstanding principal balance under the $390 Million Credit Facility; (ii) the $284 million outstanding principal balance under the $525 Million Credit Agreement; and (iii) the $127.8 million outstanding principal balance under the $360 Million Credit Agreement; and to pay certain expenses related to the refinancing, including certain structuring and arrangement fees, legal and administrative fees totaling $10.5 million. Interest on the $750 Million Credit Facility is calculated based upon Adjusted Term SOFR plus the Applicable Margin. The Applicable Margin at the inception of the facility was 2.40%. The facilities also include a sustainability-linked pricing mechanism. The adjustment in pricing is linked to three factors: ● a Fleet Sustainability Score Target, reflecting the carbon efficiency of the INSW fleet as it relates to reductions in CO 2 emissions year-over-year, such that it aligns with the International Maritime Organization’s 50% industry reduction target in GHG emissions by 2050, to be calculated in a manner consistent with the de-carbonization trajectory outlined in the Poseidon Principles (the global framework by which financial institutions can assess the climate alignment of their ship finance portfolios relative to established de-carbonization trajectories) ● a Sustainability-Linked Investment Target, reflecting targeted spending of $3 million per annum on investments in energy efficiency improvements, decarbonization, and other environmental, social and corporate governance-related initiatives; and ● a Lost Time Incident Frequency Target, reflecting performance against a Lost Time Incident Frequency average published by Intertanko. The Company is required to deliver annually, commencing in July 2023, a sustainability certificate for the preceding calendar year setting out the sustainability-related calculations required under the credit agreement. If the Company achieves all of the targets set out in the credit agreement, the Applicable Margin will be decreased by 0.05% per annum, while if the Company fails to achieve any of the targets set out in the credit agreement, the Applicable Margin will be increased by that same amount (but in no case will any such adjustment result in the Applicable Margin being increased or decreased from the otherwise-applicable Applicable Margin by more than 0.05% per annum in the aggregate). Based on the sustainability certificate submitted in July 2023, the Applicable Margin was increased by 0.05% to 2.45%. The $750 Million Credit Facility contains customary representations, warranties, restrictions and covenants applicable to the Company, ISOC and the subsidiary guarantors (and in certain cases, other subsidiaries). The sale and delivery of a 2008-built MR, which was pledged under the $750 Million Credit Facility, on November 30, 2022, resulted in a mandatory principal prepayment of $5.8 million, reduced the number of vessels collateralizing the $750 Million Credit Facility to 54 vessels, reduced the availability under the $750 Million Facility Revolving Loan to $217.4 million, and also resulted in a reduction in the scheduled future quarterly principal amortization from $30.6 million to $30.2 million. On March 10, 2023, the Company entered into an amendment to the $750 Million Credit Facility. Pursuant to the amendment, the Company (a) prepaid $97 million of outstanding principal under the $750 Million Facility Term Loan; (b) obtained a release of collateral vessel mortgages over 22 MR product carriers; (c) received from the lenders additional revolving credit commitments in an aggregate amount of $40 million, which additional commitments constitute an increase to, and are subject to the same terms and conditions as, the previously-existing revolving credit commitments; and (d) made certain other amendments to the credit agreement and ancillary documents, including amendments relating to certain hedging obligations related to the credit agreement and to repayment schedules. Following the effectiveness of the amendment, (a) the aggregate outstanding principal amount under the Following the amendment to the $750 Million Credit Facility agreement and through December 31, 2023, the Company made an additional $181.3 million in mandatory principal prepayments on the $750 Million Facility Term Loan in conjunction with the sale of three 2008-built MRs, and the release of five Suezmaxes and one Aframax Tanker from the collateral package. These transactions resulted in a further reduction in the scheduled future quarterly principal amortization under the $750 Million Credit Facility Term Loan to $19.0 million as of December 31, 2023. $160 Million Revolving Credit Facility On September 27, 2023, the Company entered into a $160 million revolving credit agreement (the “$160 Million Revolving Credit Facility”) with Nordea Bank Abp, New York Branch (“Nordea”), ING Bank N.V., London Branch (“ING”), Crédit Agricole Corporate & Investment Bank, and DNB Markets Inc. (or their respective affiliates), as mandated lead arrangers and bookrunners; and Danish Ship Finance A/S and Skandinaviska Enskilda Banken AB (PUBL) (or their respective affiliates), as lead arrangers. Nordea is acting as administrative agent, collateral agent, coordinator and security trustee under the Revolving Credit Agreement, and ING is acting as sustainability coordinator. The $160 Million Revolving Credit Facility comprises a 5.5-year revolving credit facility in an aggregate amount of $160 million that matures on March 27, 2029 and reduces on a 20-year age-adjusted profile. The $160 Million Revolving Credit Facility is secured by a first lien on five of the Company’s vessels (the “Collateral Vessels”), along with their earnings, insurances and certain other assets, as well as by liens on certain additional assets of the Borrower. Interest on the $160 Million Revolving Credit Facility is calculated based upon Term SOFR plus the Applicable Margin (each as defined in the credit agreement). The Applicable Margin is 1.90% and is subject to a sustainability-linked pricing mechanism, pursuant to which the Applicable Margin may be decreased or increased by 0.075%, as described in greater detail below. The sustainability-linked pricing adjustment is linked to three factors, which are consistent with those contained in the Company’s $750 Million Credit Facility described above. The Company will be required to deliver annually, commencing for the period ending June 30, 2024, a sustainability certificate for the preceding calendar year setting out its sustainability-related calculations. If the Company achieves all of the targets set out in the credit agreement, the Applicable Margin will be decreased by 0.075% per annum, while if it fails to achieve any of those targets the Applicable Margin will be increased by that same amount (but no such adjustment will result in the Applicable Margin being increased or decreased from the otherwise-applicable Applicable Margin by more than 0.075% per annum in the aggregate). The $160 Million Revolving Credit Facility also contains customary representations, warranties, restrictions and covenants applicable to the Company, the Borrower and the subsidiary guarantors (and in certain cases, other subsidiaries), including financial covenants that are consistent with existing financial covenants in the $750 Million Credit Facility, as further described below. On September 29, 2023, $50 million of the $160 million available under the $160 Million Revolving Credit Facility was drawn for general corporate purposes (including paying certain expenses related to the new financing). The $50 million was repaid in full on October 30, 2023, increasing the undrawn revolver capacity under this facility to $157.0 million as of December 31, 2023. ING Credit Facility On November 12, 2021, the Company, together with its indirect subsidiaries Diamond S Shipping Inc. (together with the Company, the “Guarantors”) and NT Suez One LLC, the borrower, entered into a credit agreement for a $25 million term loan facility with ING Bank N.V., London Branch, as lender, administrative agent, collateral agent and security trustee (the “ING Credit Facility”). The ING Credit Facility is secured by a first lien on the Suezmax owned by NT Suez One LLC, a wholly owned subsidiary of the Company, along with its earnings, insurances and certain other assets. The full $25 million was drawn down on November 12, 2021 and the Company . Interest on the loan is based upon LIBOR plus a margin of 2% . The loan amortizes in quarterly installments of approximately $0.5 million commencing in February 2022 and matures on the fifth anniversary of the borrowing date in November 2026 with a final balloon payment due at maturity in an amount equal to the remaining principal amount of the loan outstanding on that date. The maturity date is subject to acceleration upon the occurrence of certain events as described in the ING Credit Facility. The Company used substantially all of the proceeds of the loan under the ING Credit Facility to repay approximately one-half of the principal and interest amount due under the (approximately $22.0 million), with the remaining balance outstanding being repaid by the other shareholder in WLR/TRF. The ING Credit Facility was amended on March 27, 2023, to change the reference rate from three-month LIBOR to an adjusted three-month Term SOFR rate, effective on the May 12, 2023 interest rate reset date. Ocean Yield Lease Financing On October 26, 2021, the Company entered into lease financing arrangements with Ocean Yield ASA for the sale and leaseback of the six VLCCs that previously collateralized the Sinosure Credit Facility, for a total net sale price of $374.6 million (the “Ocean Yield Lease Financing”). The proceeds from the transactions, which were received on November 8, 2021, were used to prepay the $228.4 million outstanding loan balance under the Sinosure Credit Facility, with the balance intended for general corporate purposes, which included a $100.0 million voluntary prepayment on the $525 Million Facility Revolving Loan. The Company incurred issuance and other debt financing costs of $3.9 million on this transaction. Under these lease financing arrangements, each of the six VLCCs is subject to a 10-year 10-year The lease financing arrangements with Ocean Yield were amended effective on February 21, 2023, to change the reference rate from three-month LIBOR to an adjusted three-month Term SOFR rate, effective on the interest rate reset date on May 7, 2023. BoComm Lease Financing Relating to Dual-Fuel LNG VLCC Newbuilds On November 15, 2021, the Company and three of its vessel-owning indirect subsidiaries entered into a series of sale and leaseback arrangements with entities affiliated with the Bank of Communications Limited (“BoComm”) in connection with the construction of three dual-fuel LNG VLCC newbuilds (the “BoComm Lease Financing”). BoComm’s obligation to provide funding pursuant to the terms of the sale and leaseback agreements commenced when construction began on the first vessel in November 2021. The three newbuilds were delivered to the Company on March 7, 2023, April 11, 2023, and May 24, 2023, respectively. The BoComm Lease Financing provided the funding of $244.8 million in aggregate ( $81.6 million each vessel) over the course of the construction and delivery of the three vessels. Under the lease financing arrangements, each vessel is subject to a seven-year bareboat charter commencing on delivery of each vessel at a bareboat rate of $21,700 per day, with purchase options exercisable commencing at the end of the second year. Toshin Lease Financing On December 7, 2021, the Company entered into lease financing arrangement with Toshin Co., Ltd (“Toshin”) for the sale and leaseback of a 2012-built MR, which was a $390 Million Facility Collateral Vessel, for a net sale price of $17.1 million (the “Toshin Lease Financing”). The transaction generated $6.9 million net proceeds, after prepaying $10.2 million of the $390 Million Facility Term Loan. The Company also incurred issuance and other debt financing costs of $0.4 million on this transaction. Under the lease financing arrangement, the vessel is subject to a 10-year 10-year COSCO Lease Financing On December 23, 2021, the Company entered into lease financing arrangements with Oriental Fleet International Company Limited (“COSCO Shipping”) for the sale and leaseback of an Aframax and an LR2, both $390 Million Facility Collateral Vessels, for a net sale price of $54.0 million in total (the “COSCO Lease Financing”). The transactions generated $19.9 million net proceeds, after prepaying $34.1 million of the $390 Million Facility Term Loan. The Company also incurred issuance and other debt financing costs of $1.4 million on this transaction. Under these lease financing arrangements, each of the two vessels is subject to a seven-year seven-year In May 2023, the Company tendered notice of its intention to exercise its options to purchase one 2013-built Aframax and one 2014-built LR2, which were bareboat chartered-in under the COSCO Lease Financing arrangements. The aggregate purchase price for the two vessels of $46.4 million, consisted of the $45.2 million remaining debt balance and $1.2 million of purchase option premiums. The transaction closed on July 3, 2023. Hyuga Lease Financing On January 14, 2022, the Company entered into a lease financing arrangement with Hyuga Kaiun Co., Ltd (“Hyuga”) for the sale and leaseback of a 2011-built MR, which was a $390 Million Facility Collateral Vessel, for a net sale price of $16.7 million (the “Hyuga Lease Financing”). The transaction generated net proceeds of $5.7 million, after prepaying $11.0 million of the $390 Million Facility Term Loan. Under the lease financing arrangement, the vessel is subject to a nine-year bareboat charter at a bareboat rate of $6,300 per day for the first three years, $6,200 per day for the second three years, and $6,000 per day for the last three years, with purchase options exercisable commencing at the end of the fourth year and a $2.0 million purchase obligation at the end of the nine-year term. Kaiyo Lease Financing On April 25, 2022, the Company entered into a lease financing arrangement with Kaiyo Ltd. (“Kaiyo”) for the sale and leaseback of a 2010-built MR, which was a $390 Million Facility Collateral Vessel, for a net sale price of $15.2 million (the “Kaiyo Lease Financing”). The transaction generated net proceeds of $5.4 million, after prepaying $9.8 million of the $390 Million Facility Term Loan. Under the lease financing arrangement, the vessel is subject to an eight-year bareboat charter at a bareboat rate of $6,250 per day for the first four years, and $6,150 per day for the remaining four years, with purchase options exercisable commencing at the end of the fourth year and a $1.5 million purchase obligation at the end of the eight-year term. Kaisha Lease Financing On May 12, 2022, the Company entered into a lease financing arrangement with Kabushiki Kaisha (“Kaisha”) for the sale and leaseback of a 2010-built MR, which was a $525 Million Facility Collateral Vessel, for a net sale price of $15.2 million (the “Kaisha Lease Financing”). The transaction generated net proceeds of $10.6 million, after prepaying $4.6 million of the $525 Million Facility Term Loan. Under the lease financing arrangement, the vessel is subject to an eight-year bareboat charter at a bareboat rate of $6,250 per day for the first four years, and $6,150 per day for the remaining four years, with purchase options exercisable commencing at the end of the fourth year and a $1.5 million purchase obligation at the end of the eight-year term. Debt Covenants The Company was in compliance with the financial and non-financial covenants under all of its financing arrangements as of December 31, 2023. The $750 Million Credit Facility, $160 Million Revolving Credit Facility, the ING Credit Facility and certain of the Company’s lease financing arrangements contain customary representations, warranties, restrictions and covenants applicable to the Company, the Borrower and the subsidiary guarantors (and in certain cases, other subsidiaries), including financial covenants that require the Company (i) to maintain a minimum liquidity level of the greater of $50 million and 5% of the Company’s Consolidated Indebtedness; (ii) to ensure the Company’s and its consolidated subsidiaries’ Maximum Leverage Ratio will not exceed 0.60 to 1.00 at any time; (iii) to ensure that Current Assets exceeds Current Liabilities (which is defined to exclude the current potion of Consolidated Indebtedness); and (iv) to ensure the aggregate Fair Market Value of the Collateral Vessels will not be less than 135% of the aggregate outstanding principal amount of the Term Loans and Revolving Loans of each Facility. The Company’s credit facilities also require it to comply with a number of covenants, including the delivery of quarterly and annual financial statements, budgets and annual projections; maintaining required insurances; compliance with laws (including environmental); compliance with the Employee Retirement Income Security Act of 1974 (“ERISA”); maintenance of flag and class of the collateral vessels; restrictions on consolidations, mergers or sales of assets; limitations on liens; limitations on issuance of certain equity interests; limitations on transactions with affiliates; and other customary covenants and related provisions. Interest Expense The following table summarizes interest expense before the impact of capitalized interest, including amortization of issuance and deferred financing costs (for additional information related to deferred financing costs see Note 3, “Significant Accounting Policies”), commitment, administrative and other fees, recognized during the years ended December 31, 2023, 2022 and 2021 with respect to the Company’s debt facilities: (Dollars in thousands) 2023 2022 2021 $750 Million Credit Facility $ 18,351 $ 18,558 $ — $160 Million Revolving Credit Facility 616 — — ING Credit Facility 1,734 1,054 93 Macquarie Credit Facility (1) — 1,319 274 $390 Million Credit Facility (2) — 3,346 13,022 $525 Million Credit Facility (2)(4) (2,343) 1,568 5,021 $360 Million Credit Facility (2) — 1,844 2,335 $66 Million Credit Facility (3) — — 568 Sinosure Credit Facility (4)(5) 1,974 2,254 10,839 Vessel Lease Financing Arrangements 46,748 30,223 2,655 8.5% Senior Notes (6) — 1,473 2,447 Total debt related interest expense $ 67,080 $ 61,639 $ 37,254 (1) On November 17, 2022, the Company repaid the outstanding principal balance of $17.8 million and terminated the Macquarie Credit Facility. (2) On May 24, 2022, the outstanding principal balances under the $390 Million Credit Facility, the $525 Million Credit Facility and the $360 Million Credit Facility were repaid with proceeds from the $750 Million Credit Facility, as described above. (3) On November 12, 2021, the Company repaid the outstanding balance and terminated the $66 Million Credit Facility. (4) The interest expense for these credit facilities includes the amortization for the terminated interest rate swap agreements, as described in Note 9, “Fair Value of Financial Instruments, Derivatives and Fair Value Disclosures.” (5) On November 8, 2021, the $228.4 million outstanding loan balance under the Sinosure Credit Facility was paid in full using part of the proceeds from the Ocean Yield Lease Financing, as described above. (6) On August 5, 2022, the Company redeemed the $25 million aggregate principal outstanding of the 8.5% Senior Notes due June 2023. The following table summarizes interest paid, excluding deferred financing fees paid, during the years ended December 31, 2023, 2022 and 2021 with respect to the Company’s debt facilities: (Dollars in thousands) 2023 2022 2021 $750 Million Credit Facility $ 19,798 $ 13,892 $ — $160 Million Revolving Credit Facility 311 — — ING Credit Facility 1,600 796 — Macquarie Credit Facility — 1,087 202 $390 Million Credit Facility — 3,514 11,410 $525 Million Credit Facility — 3,786 5,569 $360 Million Credit Facility — 1,870 2,590 $66 Million Credit Facility — — 624 Sinosure Credit Facility — — 9,256 Vessel Lease Financing Arrangements 44,718 27,674 2,991 8.5% Senior Notes — 1,274 2,130 Total debt related interest expense paid $ 66,427 $ 53,893 $ 34,772 Debt Modifications, Repurchases and Extinguishments During the year ended December 31, 2023, in connection with the prepayment and extinguishment of certain of the Company’s debt facilities, the Company recognized aggregate net losses of $4.0 million, which are included in other income in the accompanying consolidated statement of operations. The net losses principally reflect (i) a $1.7 million write-off of unamortized deferred financing costs associated with the mandatory principal prepayments of the $750 Million Facility Term Loan; (ii) $1.1 million write-off of unamortized deferred financing costs associated with the prepayment of the COSCO Lease Financing described above; and (iii) $1.2 million in purchase option premium fees paid in conjunction with the prepayment of the COSCO Lease Financing. During the year ended December 31, 2022, in connection with the prepayment and extinguishment of certain of the Company’s debt facilities, the Company recognized an aggregate net loss of $1.3 million from the write-off of unamortized deferred financing costs associated with such facilities. During the year ended December 31, 2021, in connection with the prepayments and extinguishment of certain of the Company’s debt facilities, the Company recognized aggregate net losses of $6.6 million, which are included in other expense in the accompanying consolidated statement of operations. The net losses reflect (i) loan breakage fees of $0.3 million related to the Sinosure Credit Facility and a write-off of $1.6 million of unamortized deferred financing costs associated with such payoff in November 2021, which was treated as an extinguishment of debt, (ii) a $4.2 million loss related to the extinguishment of the financing component of the hybrid instrument upon termination of the partial extinguishments As of December 31, 2023, the aggregate annual principal payments required to be made on the Company’s financing arrangements are as follows: (Dollars in thousands) Amount 2024 $ 127,447 2025 89,688 2026 67,731 2027 51,970 2028 53,187 Thereafter 343,927 Aggregate principal payments required $ 733,950 |
